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Stanford's attorneys portraying ex-CFO as liar

HOUSTON, USA (AP) — Attorneys for jailed Texas tycoon R. Allen Stanford are trying to portray the prosecution's star witness at the financier's fraud trial as a liar and a crook who can't be trusted.

James M. Davis, the former chief financial officer for Stanford's companies, has told jurors he lied and helped hide the fraud at Stanford's Caribbean bank but that he is telling jurors the truth about the tycoon's complicity in what prosecutors say was a more than 20-year Ponzi scheme that bilked investors out of more $7 billion.

"Can you tell the jury how we know when you are telling the truth?" Robert Scardino, one of Stanford's attorneys, asked Davis as the defence began questioning him yesterday after spending three days answering prosecutors' questions.

Stanford's attorneys were to continue questioning Davis today, his fourth day on the witness stand.

Prosecutors allege the massive scheme centered on the sales of certificates of deposit, or CDs, from the bank on the island nation of Antigua. Stanford's attorneys contend the financier was a savvy businessman whose financial empire, headquartered in Houston, was legitimate. They have suggested Davis, who worked 21 years for Stanford, is behind the fraud.

Authorities allege Stanford used depositors' money to operate his businesses, pay for his lavish lifestyle and bribe regulators and auditors. They also say he lied to depositors by telling them their money was being safely invested.

Stanford is on trial for 14 counts, including mail and wire fraud, and faces up to 20 years in prison if convicted.

Scardino questioned Davis' character yesterday, suggesting an $890,000 loan Davis testified he took from Stanford was not a loan but funds stolen from holders of CDs. Davis denied that. Davis said authorities seized his assets and he now gets by on Social Security and a small pension.

Scardino also questioned Davis, 63, about several extramarital affairs he has acknowledged, including one with Laura Holt, one of the three other Stanford executives also indicted in the case, and one with a baby sitter whom he later married.

While being questioned by prosecutors earlier yesterday, Davis told jurors that attempts to cover up Stanford's fraud grew increasingly frantic as authorities closed in but that ultimately these attempts were futile.

Davis told jurors that by 2007, he wanted to quit working for Stanford, saying "the fraud that I was participating in was killing me."

At the end of 2007, the bank owed depositors $6.6 billion, Davis said, but it had only enough funds to pay back $1.5 billion. New sales of CDs had for years been able to cover withdrawals. In 2008, sales dramatically dropped and customers were withdrawing their CDs in droves, sparked by the Great Recession, he said.

By December 2008, while Stanford reassured depositors the bank's value was worth more than $1 billion, it had only $88 million in cash Davis said.

In an effort to hide the fraud, Stanford resorted to creative bookkeeping, including falsifying documents to be shown to the U.S. Securities and Exchange Commission that showed the bank had $6.3 billion in assets related to real estate and investments in private companies, Davis testified.

"It was a lie," Davis said.

Davis said that in February 2009, he threw a computer and thumb drive into a lake at his home in Mississippi in an attempt to destroy incriminating evidence. The evidence was later recovered by authorities.

Stanford's bank and other companies were seized by authorities later in February.

Davis pleaded guilty to three fraud and conspiracy charges in 2009 as part of a deal he made with prosecutors in exchange for a possible reduced sentence.

Stanford was once considered one of the United States' wealthiest people, with an estimated net worth of more than $2 billion. He's been jailed without bond since being indicted in 2009.